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Saturday 3 December 2016

IMF ponders 'investment' role in EU bailout fund

Economy

Jan Strupczewski and Francesca Landini

Published 26/10/2011 | 05:00

THE International Monetary Fund is considering taking part in a special investment vehicle being proposed by the eurozone bailout fund but has not made a decision yet, eurozone officials said yesterday.

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"The IMF has indicated that they are considering it -- they have not taken a position," one eurozone official said. "It will all depend on the whole package."

Eurozone leaders are expected to approve a plan today to increase the fire power of the European Financial Stability Facility (EFSF) without eurozone countries having to put more money into it. The €440bn bailout fund has already been depleted by loans to Ireland, Greece and Portugal.

Under the plan, the EFSF would create a Special Purpose Investment Vehicle (SPIV) which would issue debt and use the proceeds to buy bonds of distressed eurozone sovereigns on the secondary market or extend loans to at-risk governments.

The SPIV would be open to private capital, sovereign wealth funds and the IMF to add funds, according to the proposal.

"The IMF is a possibility -- they could be one of the investors, they could be the host of this fund," a second eurozone source said.

"They have not agreed yet, but they have not ruled out this possibility. We have to define it better -- there would have to be a political agreement that this is something we would like to do and then we could talk with the IMF and the others," the second official said.

A third official said the IMF was ready to set up an administrative account for the EFSF with the Washington-based international institution. IMF shareholders and possibly sovereign wealth funds could put money into the account to help the eurozone.

Such a move would probably be easier and quicker than creating an SPIV and would provide more flexibility.

The third source said there were talks between the head of the IMF, Christine Lagarde, and European Union leaders about this technical option to raise money for the EFSF.

"An administrative account based at the IMF could be created easily since it will need only the IMF board approval to start, then it could act quickly and with little involvement of the IMF board provided it follows the guidelines given by the contributors," the third official said. (Reuters)

Irish Independent

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